T-Bar pipeline bonds go on sale

Kathleen Petty | Staff Writer

Published 1:10 pm, Tuesday, September 4, 2012

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Mayor Wes Perry and Jay Edwards, general manager for Midland County Freshwater District #1, look over a section of the pipe that will carry water and how the pipe will ft together during a tour pipeline construction in Ector County Thursday afternoon. Photo by Kathleen Petty less

Mayor Wes Perry and Jay Edwards, general manager for Midland County Freshwater District #1, look over a section of the pipe that will carry water and how the pipe will ft together during a tour pipeline ... more

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Workers with Garney Conmstruction continue connecting the pipe line through Ector County from the T-Bar Ranch to Midland. Photo by Kathleen Petty

Workers with Garney Conmstruction continue connecting the pipe line through Ector County from the T-Bar Ranch to Midland. Photo by Kathleen Petty

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(File Photo) Workers with Garney Conmstruction continue connecting the pipe line through Ector County from the T-Bar Ranch to Midland. Photo by Kathleen Petty

(File Photo) Workers with Garney Conmstruction continue connecting the pipe line through Ector County from the T-Bar Ranch to Midland. Photo by Kathleen Petty

T-Bar pipeline bonds go on sale

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Midlanders will have the opportunity to invest in the T-Bar Ranch pipeline project when bonds are issued in mid-September.

A consortium of local banks already has provided the Midland County Fresh Water District No. 1 with $70 million in interim financing.

District General Manager Jay Edwards said more than $69 million of that financing already has been spent as work progresses on the more than 65-mile pipeline. Edwards said it’s critical the bonds are sold in September as planned to keep the project moving at a fast pace and to meet the May 31, 2013 water delivery deadline.

“We’re very pleased to get this done and funded by the end of September,” Edwards said. “There’s a lot of appetite for these type of municipal bonds.”

Robert Rendall, attorney with Stubbeman, McRae, Sealy, Laughlin & Browder, which is representing the district, said the district has worked with the city, bond rating agency, Attorney General’s Office and Texas Commission on Environmental Quality to move forward with the long-term financing process.

The fresh water district board voted in August to authorize the issuance of the bonds. The district now is waiting for the completion of a mandatory 23-day waiting period before acting.

Rendall said the Attorney General’s Office requires the wait time in order for individuals to have an opportunity to object to approval, which was given to the district by the TCEQ.

The waiting period will conclude on Sept. 11. However, Rendall said financial experts have advised the board against that date -- the anniversary of the 2001 terrorist attacks -- because it still can be a volatile one in the open market.

The district would like to issue the bonds at the start of a week so the decision was made to open the sale on Sept. 17 or 18, he said.

City Council members who were alerted of the bond sale schedule last week said it will provide a great chance for Midlanders who may be interested in investing to take part in the project.

“Our city’s really strong right now, so this might be a good opportunity,” said Jerry Morales, councilman at large.

Rendall said they anticipate the issuance of several bonds, some of which will have higher interest rates and later pay-out dates.

José Cuevas Jr., chairman of the water district board, said the district does have a targeted group of investors but that Midland residents also can take part.

Notes will be issued to repay the $70 million in interim financing. Banks being repaid include: Community National Bank, Western National Bank, First Capital Bank of Texas, Bank of Texas, Security Bank, West Texas National Bank, American State Bank and Commercial State Bank.

Bonds then will be sold to finance the remainder of the project.

Cuevas said the project will cost about $200 million between construction, design and right-of-way acquisition costs.

When calculating for interest costs, the total amount of bonds and notes to be sold will be closer to $207 million, depending upon interest rates, he said.

As revenue bonds, the funds will be repaid through money generated from the delivery charge being paid to the district by the city of Midland for any water it uses.

The city has agreed to pay not more than $2.78 per thousand gallons it uses during the first three years of the contract and to utilize an average of 10 million gallons of water per day from T-Bar Ranch.

Following the initial three years, the district can raise the rate by no more than 5 percent to cover its increasing costs, the contract states.

Because they are revenue bonds, bond holders are not able to seek taxation for repayment, according to the Municipal Securities Rulemaking Board.

General obligation bonds like are issued for city capital improvements, in contrast, are backed by the full credit and taxing power of the city, according to the rulemaking board.

Edwards said the need for additional money by late September is an indication of how well the project is going.

The design of the transmission line now has been completed, he said. Design was occurring alongside construction to allow for contractors to meet the water delivery deadline.

All of the right-of-way up to Farm-to-Market Road 1788 has been purchased and more than 12 miles of pipeline is in the ground, Edwards told the council.